Selling pressures climax on regional equity markets in September

Investor sentiment led to indiscriminate selling with little attention paid to valuations, profit growth or the presence of foreign investors. It was also affected by large oil price losses from their June 2008 peak of close to $150/bbl to $90/bbl.

"The panic in global and regional markets is leading to a brutal disregard for the stark differences between the economic situation in the MENA region, especially the GCC block, and that in other global economic blocks," said Khaled Masri, Partner, Asset Management at Rasmala.

"Various measures and verbal assurances from central banks around the region have so far failed to reassure the regional investment community that the banking and financial system in our region is relatively sheltered from the worst problems plaguing the global system. Leading banks across the region have been proactive in disclosing their exposure to failed global institutions such as Lehman Brothers, but this transparency has so far failed to reassure investors."

The GCC is not completely immune to the unprecedented global financial shock but the risks to the overall regional economy and financial system are manageable. The UAE and Kuwaiti central banks have joined global central banks in cutting interest rates, with other GCC central banks expected to follow suit.

The Saudi, Dubai and Egyptian markets were the worst affected, with losses of close to 20% in September alone and similar losses in the first week of October.

The Kuwaiti equity market remains relatively defensive, with lower volatility than its peers, but still lost close to 12% of its value in the past month. It was the only major MENA market to end September with small year-to-date gains, which were erased in the first few days of October.

There was a very high correlation between the Qatari market, the panic in global markets and the sell-off in oil prices, with the country's equities ending September 11% lower, before going on to lose a further 10% in the first week of October. The Omani market has been exhibiting a tremendous amount of volatility in the first week of October, losing close to 15% after having lost 11% in September.